Venezuela is facing the worse economic crisis in its entire history, in this article, we will take a look at the situation of many Venezuelan (myself included) that are using Bitcoins to literally survive the crashing economy.
The South American country was in the past a reference for economic and political stability, Venezuela has the biggest oil reserves in the whole world, and an incredible amount of mineral resources.
Latin America was a region plagued by autocratic dictators for many years, but Venezuela had a strong democracy. Today the country has the highest inflation rate in the world, in 2015 it peaked at 275%, and the IMF predicts that it will reach 720% by the end of 2016.
The inflation rate and currency devaluation is not the only problematic situation in Venezuela. Since 2003 the country has had a capital control mechanism regulated by the government, essentially restricting the amount of foreign currency one could buy (less than $3000 per year at its peak).
The situation worsened, and today citizens of the country simply cannot buy foreign currency. The Venezuelan Central Banks is one of the main culprits, it has effectively taken the role of a fake money printing machine, covering for the government’s monetary deficit.
Lastly, the country is in the middle of an atrocious economic recession (with a GDP drop of 8% in 2015), and a shortage of food and basic utility services like clean water and electricity. Citizens have to wait at excruciating long queues to be able to buy food and products at a regulated price (which are then sold in a black market for a premium of more than 500% in some cases).
It’s not a surprise then that many tech-savvy Venezuelans embraced the Bitcoin technology. Cryptocurrency allows Venezuelans to safely store their money, even with its volatility caveats.
So how is the Venezuelan Bitcoin market? The bottom line is that the majority of the operations are done through Venezuelan first and most popular Bitcoin exchange, Surbitcoin. The company uses BlikTrade’s platform to match buy/sell orders, BlinkTrade services are used by many Bitcoin exchanges in South America. Surbitcoin has a daily volume of more than 50 BTC, which is massive considering the local figures.
Other alternatives include LocalBitcoins, P2P, and OTC transactions. Venezuela is well known for its Bitcoin mining community, the country has cheap electricity (even more than China), although recently, a series of detentions and raids ended up with the imprisonment of miners, which were charged with “smuggling” and “money laundering” accusations. Bitcoin is not illegal in Venezuela, but the government ranks high in corruption levels, making it hard to innovate in the financial or technology sector.
A lot of Venezuelans have to buy foreign currency in the black market, but buying Bitcoins is safer and easier, as citizens don’t have to perform complex bank transactions or risk getting scammed and robbed in physical trades.
Due to this terrible economic crisis, a lot of young talented people seek online alternatives to generate income, this is especially relevant for those who possess skills that are applicable to remote or telecommute jobs. Graphic Designers, coders, musicians and freelance writers use platforms such as Freelancer or Upwork to earn a living.
Wages in Venezuela are incredibly low, the monthly minimum wage is $30, but citizens need at least $184 to be able to buy the monthly essentials like meat, poultry, and vegetables. Venezuelans who are not using Bitcoin have to depend on platforms like Paypal, Neteller or Payza to receive payments, but those entails somewhat high fees, and selling those for the local currency (Bolívares) is complicated and illegal.
Platforms such as XBTFreelancer (a job board that uses Bitcoin) can help overcome obstacles for Venezuelan, another exciting project is Colony, an Ethereum blockchain-based startup that will allow people to build decentralized online companies, workers will be paid in Nectar, a token that can represent ownership or simply be converted into ether.
Undoubtedly, Venezuela has a huge Bitcoin adoption potential, according to a study made by Garrick Hileman, a member of London’s School of Economics, Venezuela ranks second in his Bitcoin Market Potential Index, only superseded by Argentina, a country that had capital restrictions and controls until president Mauricio Macri took office.
Some obstacles remain until we can see a generalized adoption of Bitcoin in Venezuela, one of them is the tech barrier, which can easily be overcome since Venezuela has a young population very proficient in the use of smartphones and computers.
Bitcoin’s use cases in Venezuela are limited to mining and the payment of goods and services through online services, but there is little to none local commerce being done with Bitcoins. The night is dark and full of terrors, but Bitcoin is embraced by a strong and loyal community with more than 8,000 members (numbers from the Venezuelan Bitcoin and Ethereum Facebook Group).
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